March 2014

Eunomia Report on European Fiscal Reform Launched


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The European Commission has launched a study by Eunomia, working with the Danish Centre for Environment and Energy (Aarhus University), on the potential for environmental fiscal reform in 12 Member States.

This study, which is part of the process of greening the European Semester, found that taxes could be moved away from labour and towards pollution (for example, air / water pollution, energy consumption and waste) in the order of EUR 35 billion in real terms in 2016, rising to EUR 101 billion in 2025, with additional reductions in labour taxes if environmentally harmful subsidies were removed. The potential change ranges from just over 1% of GDP per annum to just over 2.5% of GDP per annum in 2025, depending on the Member State concerned. Significant environmental benefits would also be derived as a result of a switch in consumption to less environmentally polluting activities.

In a press release, EU Environment Commissioner Janez Potočnik said:

“Environmental fiscal reforms have the potential to almost double the revenues they currently bring to national treasuries, with benefits for our environment as well as scope for cutting taxes on employment or cutting the deficit. That’s a powerful argument for changing the status quo.”

Project Director Dominic Hogg commented:

“The measures we have suggested could raise more than EUR 100 billion n real terms by the next decade. This could contribute to fiscal consolidation or be used as part of a tax shift. In either case, this can reduce resort to taxes which are more detrimental to economic growth and employment. We hope that Member States will consider these suggested changes.”

For more information please contact Tim Elliott who was Eunomia’s project manager.